Thomas Hoenig, former president of the Federal Reserve Bank of Kansas City, said JPMorgan Chase & Co. (JPM:US) Chief Executive Officer Jamie Dimon should resign from the board of the Federal Reserve Bank of New York because of an appearance of conflicting interests.
“Directors, when they appear to have a conflict, that’s when they should step down,” Hoenig said today in an interview in Washington, referring to directors at the Fed’s 12 regional banks. They should resign “for the perception of the integrity of the institution,” he said on Bloomberg Radio’s “The Hays Advantage” with Kathleen Hays.
Directors at the 12 regional Fed banks are under scrutiny after a $2 billion trading loss at JPMorgan revived concern that its regulator, the Federal Reserve Bank of New York, is too cozy with Wall Street.
Hoenig, a board member of the Federal Deposit Insurance Corp., retired from the Kansas City Fed last October after 20 years as its president. He was succeeded by Esther George, who had served as first vice president of the bank.
George said last month that directors at the Fed’s regional banks who don’t meet the central bank’s standards for impartiality should step down. She defended the presence of bankers on the boards.
“Bankers should serve,” George said in a statement. “There are high standards that apply to Reserve Bank directors, and when an individual no longer meets these standards, the director resigns voluntarily to allow someone who does meet the criteria to serve.”
Senator Bernie Sanders, a Vermont independent, last month introduced legislation to ban employees of bank holding companies or other firms regulated by the Fed from serving on regional boards, calling the arrangement a “conflict of interest that must be eliminated.”
Dimon has served since 2007 as a director of the New York Fed, which oversees Wall Street banks including JPMorgan, the largest U.S. lender. Bankers occupy three of nine seats on regional Fed bank boards and give advice on regional economic conditions. They have no role in bank supervision or regulation.
Dimon, in testimony this month at a House Financial Services Committee hearing about JPMorgan’s $2 billion trading loss, said regional Fed banks benefit from industry leaders’ input. The board is “more of an informational, advisory group,” he said. “Whatever the lawmakers write would be fine with me.”
To contact the reporters on this story: Jeff Kearns in Washington at email@example.com; Kathleen Hays in New York at firstname.lastname@example.org
To contact the editor responsible for this story: Chris Wellisz at email@example.com